How Investment Managers, Vendors Are Expediting IT Innovation

At Realcomm in Las Vegas, Lisa Howat, managing director of Lionpoint Group, outlined the challenges and opportunities investment managers are facing in addressing enterprise-level technology needs.
Lisa Howat

Managing Director Lisa Howat leads the real estate strategic advisory practice of Lionpoint Group, an alternative investment consulting firm based in New York. At Realcomm in Las Vegas last week, Howat detailed how real estate investment managers are increasingly taking charge of their digital leadership plans amid a rapidly innovating landscape.

How would you rate the real estate industry’s ability to keep up with technological change?

Howat: Right now, we’re seeing the most rapid pace of innovation both within and outside our industry.  As the venture capital segment’s interest in IT innovators continues to grow, so does the innovators’ ability to deliver technology-enabled solutions. The development tools are also evolving at a rapid pace, so the innovators are able to enhance their products quicker than ever. The evolution of the cloud continues to be a game-changer as well. 

Another interesting development is the number of vendors who have clients becoming stakeholders so they can have more control over the innovation path.  Clients are becoming much more sophisticated in many sectors of the industry: They have a clear-cut technology need they want to solve and the backing of a senior management team that understands the ROI, to the extent that they are willing to invest financially in the innovators to gain the advantage they seek.

What products are demonstrating the greatest impact on the real estate investment management industry’s digital transformation? 

Howat: Fund modeling for investment managers has seen the biggest breakthrough in the past year. The vast majority of investment managers perform this function in Excel. There are a variety of vendors in this space because the industry has been clamoring for an alternative to Excel for years, but they haven’t gained any traction because they are not as flexible as Excel, which is critical for fund modeling. 

Anaplan is a platform for financial planning and analysis recognized by (research and advisory firm) Gartner two years in a row for corporate and sales performance management. The platform is very similar to Excel—only better.  The use cases for the real estate industry are endless, but the use for fund modeling more specifically will have a significant impact on the industry.

The speed with which Anaplan use cases are being deployed is impressive. On average, it takes a firm three months to deploy the tool if you work with a deployment partner.Blackstone’s private equity and real estate group, for example, has had multiple use cases migrated to production less than a year after licensing the platform. The deployment is agile based with a goal of training analysts to work in Anaplan as they would in Excel. There is little responsibility for the IT department beyond systems integration with Anaplan.

The U.S.-based property management systems continue to build on their core offering for investment managers. This includes functionality to handle:

  • Investment accounting and reporting
  • Investor accounting and reporting
  • Investor relations
  • Prospective client relationship management (CRM)
  • Performance measurement
  • Budgeting             
  • Lease administration
  • Deal pipeline management

Additionally, there are some niche products gaining strength in the investment management space, which also have integration with property management systems:

  • Investran for investment/investor accounting and reporting, investor relations and performance measurement
  • Juniper Square for investor reporting and relations, as well as prospective CRM
  • VTS for commercial lease management
  • RealPage PAM for portfolio and asset management
  • Pereview for portfolio and asset management

On the valuation front, Argus now has competition building from newcomers such as Fuel and Rockport Val.

Argus has had the stronghold in this space for years in the United States. And while everyone welcomes the idea of some friendly competition, there are advantages to a network of buyers, sellers and brokers all being on the same platform, so it will be interesting to see how this develops.

What challenges do managers face in implementing a data integration solution? 

Howat: There are many real estate applications that are trying to keep their platforms closed to any software vendors they see as a competitor. As with other industries, the adoption of data standards and the willingness to support the open source via standard APIs is a critical need in our industry.

In many cases, the investment manager has no control over the way in which the source data is entered by third-party partners in disparate systems. The lack of standard processes can have a significant impact on the complexity of the integration. Leasing, for example, is probably the industry’s biggest challenge.  No two property management systems treat leases the same way, and managers have varying degrees of discipline around entering or updating a lease. To solve for this particular headache, many firms are turning to data collection services and pay to have their data cleansed and standardized before integration with their platform.   

Investment managers need to have a clear understanding of their data requirements along with documenting processes for updating the source system. They also need to make sure there are data validation rules as information is entered into the source system or when it is passed to the efficiency platform, like Anaplan or a data warehouse.   

What are a few ways in which investment managers can keep pace with these innovations? 

Howat: Most investment managers fall into one of two categories: innovators or followers.

Innovators are typically the larger managers, who are always reassessing their IT roadmap in conjunction with the latest technologies and adjusting their projects accordingly. As early adopters of new technologies, they are also in a position to influence the innovation path. These managers are also staffed to evaluate and keep pace, or they leverage firms like Lionpoint Group to assist them as needed.  There is a significant commitment on the part of senior management to invest in IT. These firms employ visionaries who understand how technology will add value to their business.

Many investment managers fall into the followers category. They assess new investment management technologies only after the product has a proven track record of successful use in the industry. Investment managers are generally less agile because they support a variety of disciplines, each with their own complexities and fairly siloed in their requirements. This makes for a very complex platform. 

The ROI associated with change can be hard to justify.  IT staffing levels are typically lower among followers than with innovators. These are the organizations with the most to gain from partnering with firms like Lionpoint Group that can help them navigate the transition from legacy to state-of-the-art information technology and gain the approval of senior management to do so.